Chainalysis, a blockchain data platform, has issued a new report on cryptocurrency crime patterns, revealing that $14 billion in cryptocurrency was sent to unlawful addresses in 2021, nearly doubling the level observed in 2020. However, those figures do not tell the entire story.
The use of cryptocurrencies is increasing quicker than ever before. Total transaction volume across all cryptocurrencies tracked by Chainalysis increased to $15.8 trillion in 2021, up 567% from totals in 2020. It's no surprise that more fraudsters are utilising cryptocurrency, given its rapid adoption.
According to Chainalysis data, around $2.2 billion was directly stolen from DeFi protocols in 2021. Chainalysis projected that illegitimate addresses presently possess at least $10 billion in cryptocurrency as of 2022, with the majority owned by wallets involved in cryptocurrency theft, darknet markets, and frauds.
Researchers at Chainalysis discovered that cybercriminals made 82% more money via scamming last year, raking in $7.8 billion in cryptocurrencies from victims. Chainalysis uncovered $2.8 billion from a scam known as "rug pulls" among the $7.8 billion. Developers in these scams construct seemingly genuine cryptocurrency ventures before stealing investor funds and disappearing.
"We believe rug pulls are common in DeFi for two related reasons. One is the hype around the space. DeFi transaction volume grew 912% in 2021, and the incredible returns on decentralized tokens like Shiba Inu have many excited to speculate on DeFi tokens," Chainalysis said. "At the same time, it's very easy for those with the right technical skills to create new DeFi tokens and get them listed on exchanges, even without a code audit. Many investors could likely have avoided losing funds to rug pulls if they'd stuck to DeFi projects that have undergone a code audit – or if DEXes required code audits before listing tokens."
Many of the high-profile attacks on DeFi exchanges in the previous year, according to Chainalysis, "may be linked back to errors in the smart contract code governing those protocols, which hackers exploit to steal funds."
The end-of-year attack on DeFi protocol Grim Finance rounded off a tumultuous year for DeFi hacks. More than $77 million was stolen from AscendEX a week before the attack on Grim Finance. A few days before, the blockchain gaming startup Vulcan Forged said that over $140 million had been stolen from their users.
Cybercriminals stole over $120 million from the DeFi platform Badger in November. Other 2021 incidents include the theft of about $600 million from Poly in August and $34 million from Cream Finance in September. Around $200 million was taken from the PancakeBunny platform in May.
